paidContent sale: a wakeup call for B2B digital media
Three years ago, Guardian's acquisition of paidContent was proof to many that digital media companies could be built into viable companies which would be valued at higher multiples than print. Yesterday's announcement that Guardian sold paidContent to GigaOm similarly seems to be a bellwether / indictment of ad-supported business-to-business (B2B) digital media.
Patrick Smith, of The Media Briefing, wrote the following when the rumors first began circulating that paidContent was on the block:
"But here’s what really matters: if there is no market for paidContent’s impartial, informed and honest reporting, while so much lazy, uninformed, linkbait-driven, speculation-heavy tech/media reporting remains, then we really are in a pickle as an industry." (full post)
I think that goes for online journalism in general.
Alan Meckler, CEO of Web Media Brands, had said that his company was interested in acquiring paidContent, but not with the intent of investing in the product, telling Sharon Waxman that the plan would be to take out costs in order to "turn it around." The M&A model for media is acquire, cut, acquire, cut... and flip. Digital media requires more scale then ever before thanks to ad networks and user-targeted advertising. The table stakes keep rising, at such a rate that few companies are really seeing profits. If Henry Blodget's Business Insider generated $4.8 million in 2010 revenues and made only $2,127.00, what the hell are we all doing?!
B2B media companies have to choose between the following options:
- Make advertising an ancillary revenue stream
- Change the advertising game in your marketplace
Option 1: Make advertising an ancillary revenue stream
From the late 90's until now, every digital startup used advertising to make the freemium model work.
- Get a ton of users first.
- Then figure out how to monetize them with advertising.
Today, you see ads in iPhone apps, desktop software, personal emails, games, social networks, login forms, and embedded in pictures. The more businesses that offer advertising, the lower the CPM, the higher the table stakes in order to maintain a profitable advertising-driven business. Supply and demand dynamics do not favor companies dependent upon online advertising.
To make matters worse, mobile advertising will likely accelerate the downward spiral of online advertising rates. Flurry, a analytics provider for mobile apps, had an insightful blog post about mobile's inventory glut.
"U.S. app inventory is not only growing at a staggering rate, but also poised to absorb the equivalent of the entire U.S. Internet display advertising spend by the end of this year ."
This flood of new inventory will further push ad yields lower. As the price of display advertising plummets, it become easier to use CPC campaigns to conduct lead generation, a B2B media company's traditional role in the marketplace. Once a market figures that out, it's all downhill from there.
So, what should you look at if you want to make advertising ancillary?
- Evaluate an e-commerce business model
- Sell your online audience data via a data exchange
- Sell your audience database data as a CRM app via the cloud
- Develop a membership model (because paywalls aren't really an option for most B2B brands)
Option 2: Change the advertising game
Google and Facebook have both succeeded in the consumer markets by offering a self-service platform that charges based on performance. While LinkedIn has applied that to a B2B context, they haven't changed the game in B2B. The landscape is still open.
Google disrupted the market by identifying people during a heightened period of interest in a topic and targeting them with text ads. Facebook competed by offering a means of targeting people that have flagged themselves as having an active interest in a topic via a "Like." Facebook improved the text ad model by adding an image to accompany text, improving click-thru's and encouraging creativity. Finally, Facebook created an opportunity to get exponential lift and have ads go viral. Any given click could turn into three clicks because of social sharing.
Here are the qualities that make up game-changing advertising plays.
- Scale: If there are three million people in your marketplace, your solution's reach should be closer to three million than it is 30,000. The old rules of print circulation shouldn't be applied to online advertising.
- Segmentation: This is where B2B can win. There aren't a lot of advertising companies that can target truck fleets with more than 50 trucks in them.
- Scoring: Not all clicks are equal, nor are all leads. Give marketers a qualitative means of measuring their marketing instead of just the quantitative click-thru rate.
- Simplicity: Marketplace education is possible, but simplicity will accelerate adoption. Without it, it will be impossible to build the momentum necessary to become a game-changer.
- Self-service: You still need a sales team for large customers, but why not let all customers handle targeting, reporting and optimization in real-time instead of having a email flow from the customer to the sales rep to the ad ops department and then back?
What options have I missed? Drop me a comment below!